By Prosper Ndlovu
Hwange Colliery Company Limited (HCCL)’s ability to continue operating as a going concern remains elusive after the ailing coal miner plunged deeper into a loss of $78,4 million for the year ended 31 December 2018 from a $43,8 million loss posted in the prior comparable period.
Although revenue increased by 27 percent to $69,1 million from $54 million in 2017 due to growth in sales volumes from 1,2 million tonnes to 1,5 million tonnes in 2018, the company’s overall performance was poor against the comparable period.
Its asset base also dropped to $158 milliom from $198 million as liabilities ran riot resulting in a negative equity position of $290 million compared to $211 million in 2017.
“This is attributable to recurring losses, which eroded the capital and reserves”, management said in a statement accompanying the financial report for the period.
The company’s performance for the period under review also ‘fell short of budgetary targets’ due to low production levels attributable to working capital constraints.
In that regard, monthly production average halved to 150 000 tonnes compared to the budgeted monthly production of 300 000 tonnes.
“As a result the company failed to meet the market demand,” company administrator, Mr Bekithemba Moyo, said.
Total sales tonnage was down at 1,5 tonnes against a budget of 3,5 tonnes. According to the report, cost of sales increased by 36 percent in the year as a result of increased input costs driven by parallel market exchange rates that were being used by most suppliers to charge their products in RTGS dollar terms.
Impairment of assets amounting to $27 million as well as subdued coal prices against increased input cost, also compounded the company’s woes.
Despite acquiring new equipment under the $32 million deal a few years ago, the report indicates the company has been experiencing low machine availability as a result of technical challenges faced in operating the equipment.
Government placed HCCL under reconstruction late last year in terms of the Reconstruction of State-indebted Insolvent Companies Act (Chapter 24:27) as a way of rescuing the company from the doldrums, which has seen its liabilities outstripping assets, making the former giant miner technically insolvent.
Mr Moyo hoped the reconstruction path was going to give a professional and fresh approach to “try and give the company a chance to overcome the bottleneck, which were centred on poor production and sales volumes”.
He said there was still hope for Hwange and announced a string of operational review strategies that are expected to yield the desired transformation.
These include increasing production and sales, optimising underground mining operations, pursuing coke production, reducing costs as well as improving efficiencies and competitiveness. These are expected to result in a brighter outlook including increasing the volume of exports.
In November last year the Zimbabwe Stock Exchange (ZSE) suspended Hwange Colliery from the local bourse following its placement under administration.
It said the suspension would be for the duration of the administration.
According to the Reconstruction Act, every disposition of the property, including rights of action, of the company and every transfer of shares or alteration in the status of its members, made after the commencement of the reconstruction, shall, unless the administrator otherwise orders, be void. The Chronicle